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Will Bitcoin Crash To Zero? A Full Analytical Review

Aug 28, 2024

A Brief Overview of Bitcoin and Biggest Crashes in History

Although Bitcoin seems to be alive and well, nearly every year someone pronounces it dead. The reason is easy to grasp. Sometimes Bitcoin gets overexposed to the people who don’t like it or even don’t understand what it is. When they see that the BTC price drops from $20,000 to $8,000 they see it as a “death” of cryptocurrency ignoring the fact that even in the bear market Bitcoin is used by millions of people.

Image source: Bitcoinist

Now, let’s analyze the biggest downfalls of the BTC price throughout its history. The cases observed below will show if people’s confidence in Bitcoin is crisis-proof.

2011

The first brutal crash of the BTC price followed by the harsh bear market took place in June of 2011 when Bitcoin was one year and a half years old. In April of 2011, the BTC price crossed the $1 mark for the very first time. The following weeks saw a mind-blowing bull market resulting in Bitcoin hitting the $32 price on June 8. Later in June the price dropped to $0.01!

Image source: BitMEX blog

The sell panic of 2011 is attributed to the hacking of the Mt. Gox exchange that was responsible for the majority of BTC trading at the time. Hackers stole 850,000 BTC, undermining trust in the safety of cryptocurrency. Bitcoin regained a $32 value only in February of 2013. It’s understood that for many the 2011 downfall was the death of Bitcoin.

2014

The next infamous BTC crash took place in 2015. After growing from $100 to around $1,100 in less than six months of 2013, the price began to deflate quickly. In January 2015 it dropped to $170. Bitcoin investors won’t see BTC traded at $1,000 until January 2017.

Mt. Gox was to blame again. In February of 2014 the exchange blocked all BTC withdrawals due to another hacking. This and other events led to a long-term crypto winter. In 2015, the BTC price began to grow again, reaching the $1,000 level once more in January 2017.

2018

It took only a year for Bitcoin to go from $1,000 to $20,000. However, in the first months of 2018 the price dropped to $8,000. By 2019 the BTC price shrunk to $3,200.

There were several reasons for a trend reversal and long bear market. In January 2018, the Japanese cryptocurrency exchange Coincheck was hacked with $530 million worth of NEM (XEM) stolen from it. In the US, the SEC was rejecting the apps that allowed users to trade BTC. Facebook, Google, and other top tech companies forbid the cryptocurrency ads on their platforms.

2022

The beginning of 2021 saw a strong rally on the crypto market. In April and November BTC went through new peaking prices. At some point the BTC market cap exceeded the $1 trillion mark.

However, it took only a couple of months for the price to decline from $68,000 to $36,000. In July 2022, the price went below the $20,000 level and dropped below $17,000 in November. Only in 2023 the BTC price began to grow up again, reaching new highs in the spring of 2024.

Image source: Coingecko

The reason for the decline was the media narrative surrounding the environmental impact of Bitcoin mining. Elon Musk contributed to FUD by withdrawing the recent decision to allow clients buying Tesla vehicles for Bitcoin. Probably the bigger reason was the FTX exchange implosion. Some experts went so far to urge people to stop investing in crypto. In 2024 Bitcoin hit a new all-time high.

Strengths & Weaknesses of Bitcoin

As you can see from the examples from the previous chapter, Bitcoin has a strength that helps it to overcome the periods of decline and FUD. The strengths and weaknesses within this cryptocurrency drives Bitcoin’s value up and down. Let’s see what are the advantages and disadvantages of the world’s first cryptocurrency.

Strengths

Trustworthiness: The Bitcoin network has been safe for 15 years. Despite the risk of a 51% attack, Bitcoin’s architecture proved to be secure and fully operable.

Free of censorship: For 15 years Bitcoin has been providing immutable, transparent, and censorship free distributed ledger. It’s hard to imagine something like this in the pre-Bitcoin Internet.

Hassle free remittance: Bitcoin revolutionized cross-border payments. With BTC, sending money abroad is as easy as sending it to a person next door.

Deflationary by design: The Bitcoin total supply has a hard cap of 21 million units. New coins emerge on the market in increasingly smaller amounts due to the regular decrease of the mining reward (halving).

Popularity: Bitcoin is not only the first cryptocurrency, but also the crypto with the highest market cap, price, and adoption. It even became a legal tender in El Salvador.

Autonomy: No matter what happens in the world, as long as you control the pair of keys to your wallet, no one will take your BTC away from you.

Weaknesses

Low speed and high costs: Sending BTC may cost a lot while the transaction may take considerably longer than a usual transaction made via the regular bank.

Environmental impact: Bitcoin mining that secures the network and validates transactions consumes as much energy as entire countries.

Uncertain legal status: The legal status of Bitcoin varies heavily depending on jurisdiction. More than that, it can change dramatically over time. Different political powers have varying attitudes towards crypto. It hinders the development of the crypto industry.

Will Bitcoin Crash To Zero?

Crash to zero is not impossible. Unlike gold, silver or sugar, Bitcoin can lose its value due to a technological shift. It can be replaced by a more convenient digital currency or can lose its value after a fundamental security breach.

Even if something like this happens, recovery is not impossible. As you can see, Bitcoin is capable of coping with turbulence. If people try to sell BTC and someone buys it, BTC gains value. It can happen even in the conditions of total ban on all operations with cryptocurrencies.

What Happens if Bitcoin Crashes to Zero?

If Bitcoin loses its value, around a million miners will stop doing their job and look for other income opportunities. Due to dependency of the cryptocurrency market on Bitcoin, most of the crypto infrastructure will go bankrupt and shut down. All major cryptocurrencies will face a huge sell-off. Some platforms will probably survive and change focus. Survivors and new projects will have to adapt and find new strategies to benefit from blockchain.

How to Maximize Your Safety?

Although the total downfall of Bitcoin is probably not going to happen any time soon, you can get prepared using the basic rules of safe investing:

Diversify your portfolio (hold different classes of assets, not only cryptocurrencies)
Monitor the news not to miss the right moment to get rid of BTC if this moment comes
Don’t fall to emotions (fight fear and greed, don’t buy BTC because of FOMO, don’t sell it because of FUD)
Don’t invest more than you can afford to lose

Conclusion

Although Bitcoin has strong support from investors, scientists, some politicians, and ordinary people, we cannot fully exclude the probability of BTC crashing to zero at some point.

Thankfully, you don’t need any special knowledge to get prepared for such a scenario. General risk management tactics will be more than enough.

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